The metaverse sector is experiencing its own housing crisis moment thanks to a massive drop in virtual land prices in 2022, driven by declining user interest and a cryptocurrency bear market. In particular, metaverse projects built on the ETH blockchain , including Sandbox and Decentraland, have seen significant declines in valuations and other key metrics, data from WeMeta shows.
For example, the average price of land sold across Decentraland peaked at $37,238 in February 2022. As of August 1, however, their price has dropped to an average of $5,163. Similarly, the average Sandbox sale price dropped from about $35,500 in January to about $ 2,800 in August. Overall, the average price for a parcel of virtual land across the six major metaverse projects dropped from around $17,000 in January to around $2,500 in August, a drop of 85%.
Weak volumes of land sales further indicate a decline in user interest in metaverse projects. On a weekly average, volume, which represents the amount of land traded (derived in currency), fell from a peak of $1 billion in November 2021 to around $157 million in August 2022.
At the same time, the market valuation of the metaverse tokens in circulation fell by more than 80%, further driven by the broader retreat of the entire cryptocurrency sector due to adverse macroeconomic conditions. For example, the market valuation of Decentraland's MANA tokens in circulation fell from $10 billion in November 2021 to $2 billion in August 2022. Similarly, Sandbox's net capitalization of SAND reached $8.4 billion to around $1.78 billion over the same period. Meanwhile, in addition to projects focused on the metaverse blockchain, the exchange-traded fund Roundhill Ball Metaverse (METV) is also tanking. The ETF provides investors with exposure to companies that use the metaverse in their growth strategy,
However, according to a recent McKinsey report, corporations, venture capital funds and private investors poured over $120 billion into the metaverse sector from January to May 2022, more than double the $57 billion invested in all of 2021. Despite the decline in the metaverse market, McKinsey believes the space could become a $5 trillion industry by 2030, stating that e-commerce alone is likely to realize a market impact of $2 to $2.6 trillion , followed by the academic virtual education industry, which could have an impact of $180 billion to $270 billion.